Which GOP Lies on Tax Reform are the Most Effective?

A few weeks ago, we marveled at how the GOP has been using populist messaging on their tax reform bill, which is a massive giveaway to wealthy individuals and profitable corporations. We recently stumbled across a poll which sheds some light on exactly why the GOP can't simply be honest about their bill. The poll was conducted by the American Action Network, a conservative nonprofit issue advocacy group. To get an idea of what the AAN is all about, check out this attack ad they ran against the Consumer Financial Protection Bureau using Soviet imagery. If you are not familiar with the CFPB, it is a independent agency whose creation was largely the work of Massachusetts Senator Elizabeth Warren and investigates predatory practices in the financial industry. 

Aside from being commissioned by a right wing organization with a habit of comparing basic consumer protections to the gulag, only conservatives from Republican districts were surveyed. So if there is any popular support for tax reform, then this is where we should find it. In this group 77% thought that Congress should cut taxes for individuals and 54% thought that Congress should cut taxes for individuals and businesses. A bare majority of support for tax cuts on individuals and businesses is pretty terrible when the group you are polling is the group that should be the most enthusiastic about tax reform. This number is consistent with recent pew polling which found that only 48% of conservative Republicans and 41% of Republicans overall thought taxes should be lowered on large businesses. The same Pew poll also found that 36% of Republicans want taxes cut for households incomes over 250k.

So how do you make incredibly unpopular tax cuts for the wealthy and for corporations palatable? It's simple, you just lie about it. Take this question for example:

Lower the tax rates on small businesses from 40% to 25%: 83% Approve

This refers to the provision in the tax reform bill which caps the tax rate for pass through income at 25%, down from the current 40%. A pass through business is a small business which is not subject to corporate taxes, where business income is claimed on the owners individual returns. Republicans want you to believe that capping the pass through rate is going to help 'Mom and Pop' type businesses, and that is clearly quite popular. However 86% of small businesses already pay less than the 25% rate, and so they don't make enough to benefit from the cut. Most of the benefit goes to high earning professionals such as self employed investment managers, lawyers, doctors, and lobbyist who can set up a shell corporation to pass their income through to dodge thousands in taxes. Not many people would equate a wealthy lawyer with a small business, although in fact many wealthy lawyers own pass through businesses and would therefore see huge tax cuts. A lower tax rate on pass through income vs personal income is known to lead to tax dodging. For example, Kansas exempted pass through income from state tax, which lead to such extreme tax avoidance that the Republican-controlled state legislature overruled Governor Sam Brownback's veto of a bill reinstating pass through taxes.

So why can't the GOP admit that the pass through rate cap is just a loophole to allow high earners to dodge taxes in ways that middle class can't? That's because 70% of respondents in the AAN survey wanted to keep the 40% top tax rate on the highest earning individuals and cut taxes for the middle class. Everyone loves Mom and Pop businesses, but everyone hates tax loopholes for the wealthy. So if you want to give the wealthy a tax loophole, then you say it's a cut for Mom and Pop.

On the topic of loopholes, the AAN survey asked the following question:

Set the corporate tax rate at 20% and close business tax loopholes: 79% approve

If only 54% approved of a tax cut for individuals and businesses, how is it possible for 79% to approve of this question? That's a discrepancy of 25 points. It's most likely a result of wording, they specifically said 'set' instead of 'cut' and they threw in the part about closing loopholes. This question probably says more about the popularity of closing loopholes than it does about the popularity of corporate cuts. There is further proof of that loopholes are unpopular in the survey. 80% of respondents found the following statement convincing:

No more tax loopholes means special interest groups will start paying their fair share in taxes and that benefits everyone.

The tax reform bill closes a few business tax loopholes, but of course it preserves many more.

Another popular provision in the tax reform bill is the doubling of the standard deduction from $6,000 to $12,000 for single filers and from $12,000 to $24,000 for married couples. 81% of respondents in the AAN survey approved of this. What they did not mention however, was that personal exemptions were simultaneously being repealed. Personal exemptions allow a filer to exempt $4,050 of income from taxes per person in their household. If you are a family of four who uses the standard deduction, under the current law you had the $12,000 standard deduction plus $16,200 in personal exemptions for a total of $28,200 in tax exempt income. Under the GOP proposal, the standard deduction is doubled but the personal exemptions are gone, meaning the same family now only has $24,000 in tax exempt income. That family four will responsible for paying tax on an additional $4,200 of income, an a family of three would roughly break even.

That's not the whole story when it comes to families though. As you can imagine, cutting taxes for middle class families was found to be overwhelmingly popular in the AAN survey. The AAN has been circulating adds tailored to key congressional districts claiming that a typical family will save $1,223 a year under the GOP proposal. This figure comes from a recent article in Forbes, which calculated that a family of four using the standard deduction would save this amount. The savings mainly come from an expansion in the child tax credit, which offsets the increased taxable income for this family from the loss of personal exemptions.

But of course, this is a misleading calculation. Personal exemptions are indexed to inflation, meaning that the amount exempted increases each year to account for increased costs of living. The child tax credit is not, so the value of the credit shrinks a little each year. Another analysis found that a family of four making $59,000 a year would get a tax cut of $1,100 in 2018, which would gradually evaporate until it turns into a tax increase of $402 by 2026. The GOP and the AAN are well aware that cherry picking provisions in proposal can make it seem like it is benficial to families, but as a whole the bill raises taxes on 45% of families with children by 2027, even under some fairly generous assumptions.

After reading this poll and comparing the messaging from the GOP and groups like the AAN on tax reform to what their tax reform bill actually does, there should be no doubt in anyone's mind that the Republican party's proposal exists for the sole purpose of redistributing wealth from the middle and working class to the top 0.1% of the income distribution. We'll be on the phone with Rodney Frelinghuysen, our congressional representative, until this bill ends up in the trash where it belongs. If you want to get involved, check out TrumpTaxScam.org. If you want some specific things to say to your member of congress, use these call scripts, which deal with some of the sadistic aspects of the bill we didn't get a change to discuss here. Don't forget to tell your representative that you're not falling for the GOP's lies.